Often it may occur that the property you are buying, upon inspection, reveals
a problem that needs correcting. The problem may be a leaky faucet, sagging
floor, termite damage, defective roof, or any other problems from small to
substantial. In the haste to close escrow, a Buyer may agree to let the repair
work be done after the escrow has closed. Is there any damage in that? Will
the Buyer be protected?
Generally a purchase agreement between Buyer and Seller contains a
provision for an inspection of the property, to be made by the Buyer. The
Buyer then has a specified period of time, such as ten working days, to approve
or disapprove the inspection report. The Buyer most often still wants to go
ahead with his purchase, but wants certain defects corrected by the Seller.
Some defects the Buyer may be willing to accept.
The best solution is to have the seller correct the problem or defect
before escrow closes. Once escrow has closed, it may be very difficult to get
the Seller to perform the necessary repairs. The answer to this problem is to
have money held back in escrow at closing time. The escrow holder acts as the
stake holder of the money, and this money is then be released only after the
repairs have been made.
Provision for holding funds in escrow is done by amendments made to the
escrow instructions. These amendments must be signed by both the Buyer and the
Seller. The escrow closing agent can prepare these amendments for you.
The Buyer and Seller could negotiate to split the repair costs, or the Seller
may agree to lower the purchase price of the property or the Buyer could agree
to accept the property "as is", thereby accepting the items found in the
inspection report.
A word of caution is that once escrow has closed, it may be very difficult
to go back after the Seller for repairs. Once the deed is recorded, the Buyer
becomes the legal owner of the property and responsible for the property in
it's condition at that time. Title insurance will not cover building defects.
A home warranty policy will typically cover only certain items which are found
defective and of which the Buyer was not aware existed before the close of
escrow.
More Title & Escorw Topics:
Proration of Rents in Escrow
Resolving Boundary Disputes
Dealing With Clouds On Your Title
Closing Escrow When You Are Out of Town
Published: August 6, 1999
Use of this article without permission is a violation of federal copyright laws.
